The Small Claims scheme was set up so as to allow claimants to go to the law without the need of the expense of instructing lawyers and so as hourly rates charged by solicitors have increased, so has the attractiveness of bringing a claim in the Small Claims track.
One of the many benefits for claimants litigating in the Small Claims track is that they are unlikely to face an adverse costs order should their claim be unsuccessful. With the limit for Small Claims track limit now at £10,000 for non-personal-injury claims and £1,000 for personal injury claims and with those financial limits under consideration, it is worth a reminder of exactly what the rules say on the recoverability of costs.
What are the relevant rules?
To a large extent, the rules governing Small Claims track cases are stand alone and largely self-contained within Part 27 of the Civil Procedure. Indeed, some of the more familiar rules, like Part 36 do not apply to Small Claims track cases.
Rule 27.14 deals with the costs regime. It is important to note that the rule applies only to cases that have been allocated to the Small Claims track and that special rules govern those cases yet to be allocated to track (and which are beyond the scope of this article).
Subsection (27.14(2)) contains the general overarching principle of costs in the Small Claims track which is that:
So far; so simple.
However, that general rule is then subject to a number of exceptions, the most obvious one being that the court may award any applicable fixed costs set out in Part 45 of the CPR. Generally speaking these are modest amounts that vary depending on the nature of the claim, its value and the stage at which the claim is concluded.
There are a number of other exceptions, some very straightforward (for example, as one might expect, a successful claimant can recover court fees and witness expenses) and some slightly more complex (particularly where there is an interplay with the Portal Claims process for low value personal injury claims).
However, I want to concentrate on one particular exception: that that exists where a party has been found to have behaved unreasonably.
Unreasonable behaviour exception
Rule 27.14(2)(g) states that the court may summarily assess a party’s costs and order them “to be paid by a party who has behaved unreasonably”. This is in many ways the most significant exception to the no costs rule, because it provides for the court to award more in costs than those amounts proscribed elsewhere in the rule.
The CPR contains little guidance for the court to follow in assessing unreasonableness, save for 27.14(3) which states that a party’s rejection of an offer of settlement “will not of itself constitute unreasonable behaviour”; but the court can take it into account when applying the test.
Surprisingly, especially given how long this particular rule has been in existence and how frequently parties must have argued the point, there is little reported authority on how the test should be applied, but we believe that it is worth drawing your attention to these two decisions:
In Memon v TNT UK Ltd (2009) Judge Platt sitting at Romford County Court held on appeal that the District Judge was wrong to refuse the Defendant an unreasonable costs order, where the Claimant had attempted to claim 24 days car hire, but where the court subsequently held that there was no need for the Claimant to hire a car at all. The appeal was allowed.
In Clohessy v Homes (2003), District Judge Stuart-Brown, sitting in Bristol County Court granted the Defendants an unreasonable costs order, where he it was held that on any objective assessment, the claim was likely to have failed from the outset.
In both of these cases it is worth pointing out that the Defendants had made offers to settle, something that was referred to by both Judges when arriving at their respective conclusions. It is also probably worth pointing out that neither of these decisions are binding and will have been decided on their facts, but they are helpful in our view nevertheless.
Given that the special costs rules of the small claims track are arguably its raison d’être, Judges can be reluctant to order costs for unreasonable behaviour, especially when a party is unrepresented, but we believe that there are a number of features that when present together might mean that such an order is attainable and we list a few of these below:
- A consistent failure to respond to correspondence and/or telephone calls
- A failure to properly set out a case in respect of liability and/or quantum pre-litigation
- An unwillingness to discuss the case and narrow issues
- Dilatory conduct leading to delay
- A claim that is unreasonably made and without merit
- Exaggeration of a claim and/or dishonesty
- A failure to follow the standard Small Claims track directions
Where any of these features are present in a case, then steps should be taken to place the party on notice that an order for unreasonable conduct will be sought in the event that proceedings are issued.
In our view judicial guidance is much needed in this area and if the Small Claims track limit is increased, then we would not be surprised to see this area develop and for the definition of unreasonable behaviour to be considered by the appellate courts.